Any price below the equilibrium price will lead to
A. increase in supply B. excess demand C. equality of demand and supply D. decreases in demand
Correct Answer: B
Explanation
Any price below the equilibrium price will lead to excess demand with decrease in supply. This is so because, people generally buy more of a commodity when the price is low while suppliers will want to supply more when the price is high. Hence, for a price set below equilibrium, suppliers will cut back on producing more of that commodity while demand will be high.